Beware the Rush to Emerging Markets

Investors are flooding back into emerging markets. But beware: It may signal portfolio reshuffling more than fundamentals.

Like water breaching a dam, emerging-market investors are flooding back. The question is: Will they stay?

Inflows into emerging-market funds hit a 61-week weekly high in early April, according to EPFR Global, a statistic made more remarkable by the year of negativity that preceded it. During the first quarter, amid gyrations in the Turkish lira and a scare over China's shadow banking system, investors pulled...